About Me

Buford C. Terrell
Controlled substances laws and their consequences have been the center of my professional life for over fifteen years. I host a public interest television program in Houston, “Drugs, Crime, and Politics” , produced by the Drug Policy forum of Texas, and have done so for most of its ten-year history. Before my retirement, I taught a seminar, “Controlled Substances Law” for many years at South Texas College of Law.
In this blog I intend to explore the features and consequences of those laws, especially the unintended consequences, and look at the need for, and possibility of, changing them. Don’t expect a lot of breaking news or current events, although there will be some. My approach will be more historical and theoretical. I hope to get a lot of criticism – good, bad, and otherwise – and to start some good, heated discussions.

Monday, April 15, 2013

Prohibition and Taxes

Prohibition
and Taxes

The
Ides of April is the ideal time to look at the relationship between Prohibition
and Taxes.The place to start is to look
at the relationship between the XVIth and XVIIIth
Amendments.The untold story is that
Prohibition would not have been possible without the income tax.

By
1915, around half the states had enacted some kind of alcohol prohibition law,
and groups like the Anti-saloon League and the WCTU were thriving.But congressmen were giving no serious
consideration to national Prohibition.They couldn’t afford to.With no
income tax, the federal government depended on excise taxes for over eighty per
cent of its income, and the vast majority of those came from alcohol.Prohibition would literally shut the
government down.

The
Income Tax amendment provided fiscal detox – it enabled the Treasury to break
its dependence on alcohol.A World War
intervened, allowing near-prohibition through the subterfuge of war-time
rationing; and as soon as the war was over, the Prohibition amendment raced
through congress and the state legislatures.

Opposition
to Prohibition grew during the twenties, but political support was strong and
repeal looked unlikely.However, by 1930
repeal began rapidly gathering strength.The election of 1932 swept repeal to an unlikely victory.

(An
interesting side note is that maps showing states still supporting Prohibition
in 1930, states that have not yet adopted either marijuana decriminalization or
medical marijuana, and current “red states” (those voting Republican in the
last presidential election) are remarkably similar.)

One
important factor in the Repeal victory of 1932, although not the controlling
one, was the effect of the Great Depression on taxes.As unemployment grew and businesses closed,
governments – local, state, and federal – found their revenues from both income
and sales taxes shrinking just at a time when the need for government
expenditures grew.The return of alcohol
excises, while they would not solve the revenue problem completely, would
provide a substantial source of new revenues.Many politicians, even if they did not become public supporters of
Repeal, silenced their vocal support of Prohibition.

Does
this tale have any meaning for today?The current Great Recession is mild compared to the Great Depression of
the 1930s, but today’s governments at all levels are feeling the crunch on both
the revenue and expense sides.Employment and sales are down, both reducing income tax revenue.Property prices have plummeted, reducing the
property taxes that local governments depend on.On the other hand, expenses are up:
unemployment benefits, uninsured health costs, welfare and subsistence needs.Governments need money today.

Would
excises on marijuana solve these fiscal crises?No, they would not.But a ten- to
fifteen- percent tax (or even twenty) on a multiple bullion industry would
provide some relief.Surely, reasonable
legislators should see that the repeal of marijuana Prohibition is a reasonable
trade for this much tax relief.